But the days of tech giants paying low amounts of tax could be numbered
Amazon’s tax affairs have been thrust back into the limelight after it was revealed that it only paid £11.9m corporation tax in 2014, despite recording £5.3bn in sales from British consumers.
The revelation follows years of controversy concerning the corporate tax affairs of Amazon and a number of other tech companies including Google, Apple, Facebook and others.
The Amazon revelation was made possible after Amazon accounts filed at Companies House were reported by a number of media outlets.
Those accounts showed that Amazon made a profit of £34.4m in the 12 months to December 31, 2014, on revenues of £5.3bn (which is nearly 10 percent of the US company’s global turnover).
This meant that Amazon only had to pay £11.9m corporation tax. For years Amazon has booked its sales at its European headquarters in Luxembourg where it enjoys low tax rates. Last October the European Union (EU) launched an investigation to determine whether that tax agreement with Luxembourg signed in 2003 broke EU competition rules.
But last month all this changed, when from May 1 Amazon changed its European corporate structure, which meant that it is now booking its sales through the UK.
This means that resulting profits in the UK will now be taxed directly by the British HMRC. Amazon has also begun paying direct taxes on sales in Germany, Italy and Spain.
And it seems that the days of tech firms being able to pay very little tax by funneling sales through low-tax countries may be at an end; in the UK at least.
This is because the Chancellor George Osborne is pushing ahead with a tax clampdown. The new diverted profits tax (nicknamed the Google Tax) came into law from April, and it imposes a punitive 25 percent tax on groups deemed to be artificially routing profits overseas.
A number of other European countries are thought to be considering copying Osborne’s diverted profits tax.
Google And Co.
In 2012 the Public Accounts Committee (PAC) grilled executives from Amazon, Google and Starbucks over their “immoral” tax practices.
A leading official at the Organisation for Economic Co-operation and Development (OECD), which is charged with reforming global tax rules, has also that said technology companies are pushing “the boundaries of what is legal,” and they should stop using tax havens to shelter their profits.
In 2012, Amazon was investigated by HM Revenue and Customs (HMRC) following the revelation that it paid no corporation tax in the UK, despite the fact that it made for example £2.9 billion in sales for 2011 in the UK alone.
Do you know all about IT and the law? Take our quiz.